Litigation Release No. 18354 / September 22, 2003

SEC Charges Three Former Brokers In Offering Fraud

On September 16, 2003, the Securities and Exchange Commission (Commission) filed a complaint in the United States District Court, Southern District of Florida, alleging securities fraud against James Mulhearn, the CEO of Safetynet Industries, Inc. (Safetynet), and two Safetynet sales agents, Damian Delgado and Adrian Balboa.

The Commission's complaint alleges that from approximately November 2001 through December 2002, Mulhearn, Balboa and Delgado raised more than $600,000 from investors in a fraudulent, unregistered offering of Safetynet stock. In connection with the offering of Safetynet stock, the defendants made numerous material misrepresentations and omissions to prospective and actual investors regarding, among other things, Safetynet's business operations, projected revenues and profitability, use of investor proceeds and projected rate of return on the investment. In addition, Mulhearn misappropriated much of the monies raised for his personal use, and Balboa and Delgado collectively received over $100,000 in undisclosed commissions and bonuses. According to the complaint, Safetynet never operated a legitimate business and never sold or marketed any of its alleged products. The complaint also alleges that all three defendants were former brokers who were associated with registered broker-dealers as recently as 2002.

Mulhearn, of Coral Springs, Florida and Balboa, of Coconut Creek, Florida, have agreed to settle the charges against them, without admitting or denying the allegations contained in the Commission's complaint. Under the terms of the settlement, Mulhearn and Balboa consented to the entry of a final judgment permanently enjoining them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, and barring them from participating in an offering of penny stock. The judgment will enjoin Balboa from violating Section 15(a) of the Exchange Act. The judgment also orders Mulhearn and Balboa to disgorge ill-gotten gains and imposed a civil penalty in amounts to be determined later by the court.

The complaint also charges Delgado, of Boca Raton, Florida, with violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. The Commission's action against Delgado, which is continuing, seeks injunctive relief, a penny stock bar, disgorgement and civil penalties.